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News Analysis: Construction sector growth indicates continued UK economy recovery

English.news.cn   2014-01-04 05:44:57            

by Peter Barker

LONDON, Jan. 3 (Xinhua) -- Healthy growth in the British construction sector over December was welcomed by economists on Friday as evidence that the economic recovery is continuing.

All three construction sectors showed a good level of activity in December, with the housing market growing especially strong expansion with it growing for the 11th consecutive month, only just behind the November rate which had been a 10-year record.

Civil engineering growth held up well in December to almost match the near six-year high seen in August.

New orders in December were growing at their fastest rate since 2007, up for an eighth consecutive month.

Employment in the sector rose for the eighth month running, indicating the likelihood of continued job creation which could mean the Bank of England's 7 percent unemployment threshold for bank rate review could be reached sooner than the mid-2015 current target.

Martin Beck, UK economist with Capital Economics in London, told Xinhua "The economic recovery is proceeding; the PMI reading was quite high, driven in large part by recovery in the housing sector."

He added, "Although the economic recovery in the UK is fairly broad based it appears some part is driven by the housing market. House prices are rising at quite a rapid rate now so there are risks looking forward. How will house prices continue to rise? Will the recovery founder?"

Beck said that the construction sector was about 6 percent of the British economy.

He cautioned, "The sector is so volatile. It has fallen back so much in recent years that the recovery we are seeing in housing is driving a large part of the construction sector recovery."

Howard Archer, chief UK and European economist with IHS Global Insight, said the strength of the housing sub-sector was good news for the structure of the British economy, but growth in that area needed to be sustained over a long period.

He explained, "Improving housebuilding is particularly welcome news given that a shortage of properties is a major factor repeatedly putting upward pressure on UK house prices. Nevertheless, the fact remains that there needs to be extended, very strong housebuilding to make significant inroads into the problem."

He added, "While housing activity remains the strongest performing sector fuelled by an improving housing market, and helped by the government's Help to Buy initiative, the survey shows that the commercial and civil engineering sectors are now seeing robust activity."

Archer said that the survey was further evidence that the economy in the fourth quarter of 2013 could have at least matched the 0.8 percent quarter-on-quarter expansion achieved in the third quarter, which could give growth of up to 2 percent for 2013.

"Much will clearly depend on how well the services sector performed in the fourth quarter and how well consumer spending held up. Most evidence suggests that the services sector had a good fourth quarter, but there is a lot of uncertainty over just how strong consumer spending was," said Archer.

Editor: Mu Xuequan
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